Post on 30-Dec-2015
description
Black Economic Empowerment Progress in
Shell
Presentation to the Parliamentary Portfolio Committee for
Minerals and Energy30 August 2006
The presentation will focus on Transformation and Black Economic Empowerment in Shell
Presented By:
• Vusi Khanyile - Chairman of Thebe Investment Corporation (Pty) Ltd
• Paddy Milner – Country Chair: South Africa • Gheneez Munian – BEE Advisor
• Vernon De Vries – External Affairs Manager
• Ivan Collair – Regulatory Environment Advisor
Equity Ownership
ManagementControl
Preferential Procurement
EnterpriseDevelopment
Social Investment
EmploymentEquity
Skills Development
Supportive Culture
RetailNetwork
Shell policy
of embracing Black Economic Empowerment in South Africa is driven by
the imperatives to address the imbalances of the past and to secure the long-term sustainability of our business in
a sustainable socio-economic environment
The long term objective of BEE is the normalisation of South African society and it therefore has a number of facets all of which are included in the Oil Industry charter.
The main criteria for success of the transaction are
-whether it is aligned with the equity objectives of the Oil Industry Charter
-whether it is sustainable
Because of FDI considerations any action on BEE must be perceived positively by the international investment community and that includes the shareholders of multinationals.
The equity element of the charter was transacted by the parties, assisted by their professional advisors on a willing buyer/willing seller basis.
To achieve a successful transaction, two key variables need to be balanced and traded off
-sources of capital
-where risk is carried
The principles underpinning the discussions of the Equity Deals
Equity Ownership
Phase 1 resulted in a Corporate Structure involving 2 legal entities
Shell South Africa Holdings (Pty) LtdSSAH
ZA 2001/020068/07 (owner of Group businesses in SA)
The Shell Petroleum Company Ltd.SPCO
UK 77861
(a Shell Group holding company)
Shell South Africa Marketing (Pty) LtdSSAM
ZA 1961/000645/07
(Shell Marketing businesses in SA)
Shell South Africa Energy (Pty) LtdSSAE
ZA 2000/018439/07
(Manufacturing, Supply, Trading and Chemicals business in SA)
100%
75%
100%
25%
Thebe Investment Corporation
(Pty) Ltd1992/001846/07
Thebe Petroleum Investments
(Pty) Ltd2001/023590/07
Equity Ownership
Our Marketing Equity transaction was built on
the following foundation
SUSTAINABILTY
CHECKS & BALANCES
COMMUNITY BENEFITS
- Affordability of the equity- Preference Dividend Structure- Allocation of Risk
- Balance between operational control and minority protections
- Aims to benefit a wide range of South Africans, especially HDSA’s and contribute to sustainable development.
Equity Ownership
Summary of the current equity deal Thebe Petroleum Investments
• 25% ordinary shares (and hence asset ownership)• 25% voting rights• 25% Board representation• the right to appoint 25% of the board members• has received >25% economic interest in recent years
Equity Ownership
Economic sustainability of the transaction Structures for BEE partner’s involvement across the value chain
Phase 2 – Manufacturing, Supply and Trading in progress
Structures for involvement in the entire spectrum of the business i.e. strategy, management and operations of the business
Skills transfer and development Protection of BEE Partner against volatility of the oil business
Board and Top management Liquid Fuels Charter targets have been exceeded. Gender transformation is
our focus.
Board Representation
Top Management
SSAM
SSAM
SSAE
SSAE
ManagementControl
Black Male50%
Non-black Male25%
Black Women0%
White Women25%
White Women25%
Non-black Male50%
Black Male25%
Black Women0%
White Women11%
Black Women0%
Black Male56%
Non-black Male33% Black Male
50%
Black Women0%
Non-black Male33%
White Women17%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
% Black People % Black Women % White People
% Black People 50% 30% 47% 61% 83% 100%
% Black Women 0% 8% 16% 27% 26% 0%
% White People 50% 70% 53% 39% 17% 0%
Top ManagementSenior
Management
Professionally qualified and experienced
Skilled technical and academically qualified workers
Semi-skilled and discretionary
decision making
Unskilled and defined decision
making
Collectively, women representation in Shell is above industry average.
EmploymentEquity
Shell 65% Black 23% Black women
38% Women
Industry 69% Black 17% Black women
25% Women
Shell has a long-standing policy on the development of its employees because it believes in providing an
environment in which people can learn to excel.
Skills Development
• 1% of Payroll was spent on Black Skills development• Skills development Initiatives include:
- Women in Oil and Energy Course (10 delegates)- Global initiatives (BUILD, RECOGNISE, CHOOSE)- Executive Development Leadership Program- Global leadership Programmes - Shell Life- Expatriate exchange
Year Target BEE
%
Actual
BEE
(>50%)
%
ActualABE
(>25%)
%
ABE + BEE
% Spend
2002 5% 7% 7%
2003 10% 12% 18% 30%
2004 17% 22% 21% 43%
2005 27% 28% 27% 56%2006 60% 24% 33% 57%
Local Preferential Procurement has exceeded the Oil Industry Charter target of 25%.
BEE Procurement Strategy• BEE Procurement Policy in place
• Company and departmental targets set
• BEE standard item on Executive Management Meeting Agenda
• A BEE Team member appointed as permanent member of Contracts Board
• Monitor BEE spend on a monthly basis
• All suppliers evaluated using Industry standard
Preferential Procurement
Crude Procurement: we purchase locally where availability and economics are attractive
Challenges:• To be sustainable, crude trading (as opposed to purchasing)
needs to be a global activity.• No BEE trading house consistently offers crude on the global
market.• Shell South Africa, as a refiner, does not do true crude
trading i.e. buy and sell for profit. • In line with most oil companies, crude trading is a globalised
central activity.
Preferential Procurement
2003 2004 2005 2006Parastatals $12.4m $70.5m $28.3m $0
BEE $0 $0 $37.3m $36mNon-BEE $0 $0 $0 $0
Total $12.4m $70.5m $65.6m $36m
SHELL LOCAL PURCHASES
Shell’s enterprise development activities are aligned with the Liquid Fuels Charter
Examples of Enterprise Development include:
• Mzanzi (Logistics Company)- R300k set up costs: R120m contract over 5 yrs: 17 Owner
vehicle drivers in partnership• Livewire Program
- Business skills training. Program has been running for over 10 years
• Black Retailer Dealer development programme- Training to develop Black dealers
• Supplier Development-SASDA investment via SAPIA- 2 full time employees
• SMME support – startup, mentoring and financial assistance• Energy through Empowerment Fund – R20m underwritten by Shell Foundation
EnterpriseDevelopment
Our Corporate Social Investment aims at sustainable development initiatives as envisaged by the Liquid
Fuels Charter
About 2% of Net Profit After Tax is invested in CSI.
Categories of investment include:-• Education – especially Maths and Science• Job creation• Social development• Health - AIDS• Environment • Grants to employees involved in community projects• Road Safety program
‑ via SAPIA‑ via Shell Oil Product Africa (Drive-to-Live)
Social Investment
Internally Shell’s organisational culture, systems and demographics builds upon individual differences to
stimulate creativity, remove barriers and thus create a competitive advantage
Supportive Culture• Led at strategic level by the Chairmen of Shell’s Companies• Driven by the Transformation Committee: committee of the board• BEE advancement part of formal performance targets• Shell has a global Group Diversity and Inclusiveness Programme guided by Shell Group Business Principles.• Involvement in SAPIA, BUSA and NBI
Committees and structures to report on discrimination:
- A staff Employment Equity Evaluation Committee- A staff Employee Consultative Committee- Independent outsourced “Whistle Blower” process
Supportive Culture
We regard the stability and sustainability of our Retail Network critical to our business and
customers
Retail Network – 41% Black owned and operated• Shell has a dedicated programme in place to fast-track and support
HDSA's to successfully own and operate retail sites.• Shell provides business support to ensure changes of dealer ownership are viable and sustainable.
- Apply an evaluation model to assess true value of site- On-going support
Monitor operational and financial performance from a central point Contact with dealers daily Ground staff trained to coach and mentor Field Staff provide for technical and business support
• Retail training outsourced to an active Black retailer with strong expertise.
Reseller – 21% Black owned
Retailer
In summary, our current assessment of transformation progress towards achieving the
Liquid Fuels Charter 2010 aspirationsEquity
Ownership
ManagementControl
Preferential Procurement
EnterpriseDevelopment
Social Investment
EmploymentEquity
Skills Development
Supportive Culture
RetailNetwork
Priority Areas
• Conclude Phase II BEE deal • Increase Women participation on board• Increase Black and women representation in senior and professional levels• Direct skills spend to core and critical skills and women development• Further develop Black suppliers• Continue to build a sustainable Retail network